Hidden Errors in Workers’ Compensation: Why a Forensic Review Matters

Leland Charais

Jan 20, 2024

2 min read

Updated: Oct 20

Workers’ compensation is designed to protect employees and employers, but administering it requires information to pass through many different parties and systems. Payroll records, employee classifications, claims information, premium audits, insurance carriers, and rating bureaus may all affect the final cost.

Because the process is complex, an unnoticed reporting or calculation error can affect your experience modification factor and workers’ compensation premiums for several years.

Here are four areas in which hidden discrepancies may arise.

1. Classification and Reporting Errors

Employee classifications, payroll amounts, claims information, and other reported data can directly affect premium calculations.

An incorrect classification, improperly allocated payroll amount, or inaccurate claim record may increase premiums without creating an obvious warning. Because historical information is often used in future calculations, the financial effect of one error may continue across multiple policy or experience-rating periods.

2. Incorrect Application of Rating Rules

Workers’ compensation premiums and experience modification factors are governed by state requirements and applicable rating-bureau rules.

These rules can be detailed, technical, and subject to specific deadlines. When a rule is misunderstood or applied incorrectly, the result may be an inaccurate premium, audit, or experience modification calculation.

3. Complex and State-Specific Requirements

Workers’ compensation requirements vary by state, policy structure, and rating authority. A rule that applies in one jurisdiction may not apply in another.

This complexity creates opportunities for inconsistent interpretation and administrative mistakes. A specialized review can help determine whether the appropriate rules were applied to your company’s information.

4. Limited Visibility Into the Underlying Data

Employers do not always have a complete view of every record used to calculate their premiums.

Claims information, rating worksheets, carrier records, payroll reports, policy audits, and historical corrections may be maintained by different organizations. Without reviewing these records together, it can be difficult to identify discrepancies or understand why a premium or experience modification factor changed.

The Potential Effect on Your Business

Undetected errors may result in unnecessary workers’ compensation costs, reduced cash flow, and inaccurate experience modification factors. They can also affect renewal negotiations and how underwriters evaluate your company.

A credit experience modification factor below 1.00 does not necessarily confirm that all underlying information is correct. Likewise, an annual premium-audit refund may reflect a payroll adjustment without addressing other potential errors.

How CIV Inc. Can Help

CIV Inc. independently examines the information used to calculate your workers’ compensation premiums and experience modification factors. Our forensic review may include:

Experience rating worksheets
Claims and loss information
Payroll and classification records
Workers’ compensation policies
Final premium audits
Carrier and rating-bureau reporting

When correctable discrepancies are identified, CIV prepares supporting documentation and helps pursue eligible corrections, refunds, or premium credits.

CIV does not sell insurance or replace your insurance agent or broker. Our specialized review complements their work by helping verify that they—and your underwriters—are working with accurate information.

Are hidden errors affecting your workers’ compensation costs? Contact CIV to schedule a preliminary review.

Results vary. Corrections, refunds, and premium credits depend on the circumstances of each case, applicable regulations, policy terms, filing deadlines, and carrier or rating-bureau determinations.